UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
(Mark one)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED September 30, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-34144
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
(Exact name of registrant as specified in its charter)
Wisconsin 39-1676037
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
2727 Allen Parkway, Houston Texas 77019-2115
(Address of principal executive offices) (Zip Code)
(713) 529-0045
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) had filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __x___ No ____
Indicate number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date.
At September 30, 1998 there were no shares of Common Stock
outstanding.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statement
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
Statement of Trust Activity (Unaudited)
For the Three Months Ended
September 30,
1998 1997
(i)Distribution allocable to principal on the mortgage $ 0 $ 149,314
loans (includes $911,189 and $0 of prepayments
for the three months ended September 30, 1998 and 1997,
respectively).
(ii)Distribution allocable to int on the mortgage lns $ 173,274 $ 163,525
(iii)Deferred int added to the aggregate principal $ 0 $ 0
balance of the mortgage loans
(iv) Shortfalls to date $ 390,794 $ (963,886)
(v)Advances included in amounts actually distributed $ 0 $ 0
(vi)(a)Aggregate amt of the subordinated distribution $ 0 $ 0
which was paid to the senior certificate holders
(vi)(b)Aggregate amt of withdrawals from reserve fund $ 0 $ 0
(vii)Aggregate principal balance mortgage lns at end $ 875,645 $ 3,999,745
of period
(viii)Aggregate amount in the shortfall account $ 0 $ 0
(ix)Admin fees retained or withdrawn from the $ 2,406 $ 6,927
collection account
(x)(a)Aggregate principal balance of mortgage loans $ 0 $ 1,994,895
delinquent
(x)(b)Aggregate number of loans delinquent 0 2
(xi) Book value of real estate acquired through $ 0 $ 0
foreclosure or grant of deed in lieu of foreclosure
(xii)(a)Subordinated Amount Class B $ 0 $ 0
(Class B, C, and D mortgage pass-through Class C 0 0
certificates net of unamortized premium/ Class D 0 0
discount) Total $ 0 $ 0
(xii)(b)Subordinated amt, as a percent of principal 0 0
balance reported under (vii) above
(xiii)Amt remaining in the Debt Service Reserve Fund $ 0 $ 0
(xiv)Weighted average mortgage pass-through rate as of 10.28% 10.28%
the first day of the month immediately preceding the
reporting date.
(xv) All voluntary advances recovered during related $ 0 $ 0
prepayment period.
See accompanying notes to the financial statement.
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
Statement of Trust Activity (Unaudited)
For the Nine Months Ended
September 30,
1998 1997
(i)Distribution allocable to principal on the mortgage $ 2,974,898 $1,856,217
loans (includes $1,879,752 and $894,912 of prepayments
for the six months ended September 30, 1998 and 1997,
respectively).
(ii)Distribution allocable to int on the mortgage lns $ 279,623 $ 510,124
(iii)Deferred int added to the aggregate principal $ 0 $ 0
balance of the mortgage loans
(iv) Shortfalls to date $ 645,881 $ 33,122
(v)Advances included in amounts actually distributed $ 0 $ 0
(vi)(a)Aggregate amt of the subordinated distribution $ 0 $ 0
which was paid to the senior certificate holders
(vi)(b)Aggregate amt of withdrawals from reserve fund $ 0 $ 0
(vii)Aggregate principal balance of mortgage ln at end $ 875,645 $ 3,999,745
of period
(viii)Aggregate amount in the shortfall account $ 0 $ 0
(ix)Administrative fees retained or withdrawn from the $ 11,587 $ 24,519
collection account
(x)(a)Aggregate principal balance of mortgage loans $ 0 $ 1,994,895
delinquent
(x)(b)Aggregate number of loans delinquent 0 2
(xi)Book value of real estate acquired through $ 0 $ 0
foreclosure or grant of deed in lieu of foreclosure
(xii)(a)Subordinated Amount Class B $ 0 $ 0
(Class B, C, and D mortgage pass-through Class C 0 0
certificates net of unamortized premium/ Class D 0 0
discount) Total $ 0 $ 0
(xii)(b)Subordinated amt, as a percentage of the principal 0 0
balance reported under (vii) above
(xiii)Amount remaining in the Debt Service Reserve Fund $ 0 $ 0
(xiv)Weighted average mortgage pass-through rate as of 10.28% 10.28%
the first day of the month immediately preceding the
reporting date.
(xv) All voluntary advances recovered during the related $ 0 $ 0
prepayment period.
See accompanying notes to the financial statement.
CML CHURCH MORTGAGE TRUST
1990 RATED SERIES A-1
Notes to Financial Statement (Unaudited)
(1) Basis of Presentation
The financial statement included herein has been prepared without audit
by Christian Mutual Life Insurance Company ("CML"), the servicer
of the mortgage loans, on behalf of the M&I First National Bank,
Trustee of the CML Church Mortgage Trust 1990 Rated Series A-1
("Trustee").
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
rules and regulations of the Securities and Exchange Commission,
although CML believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in the Trust's
latest annual report on Form 10K.
On January 1, 1995 the Trust adopted Financial Accounting Standards Board
Statement No. 114, Accounting by Creditors for Impairment of a
Loan, which requires that creditors value all loans for which it
is probable that the creditor will be unable to collect certain
amounts due according to the terms of the loan agreement at the
present value of expected future cash flows, discounted at the
loan's effective interest rate, or observable market price of the
impaired loan or the fair value of the collateral if the loan is
collateral dependent. Management believes that loan carrying
values and loan loss reserves provided in this 10-Q Filing comply
with the requirements of this Statement.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Third Quarter 1998 vs. Third Quarter 1997
The Trust redeemed $1,135,909 and $119,980 of mortgage pass-through
certificates during the third quarter of 1998 and 1997,
respectively. The distributions were made from principal payments
received on the mortgage loans.
First Nine Months 1998 vs. First Nine Months 1997
The Trust redeemed $2,981,803 and $1,938,425 of mortgage pass-through
certificates during the first nine months of 1998 and 1997,
respectively. The distributions were made from principal payments
received on the mortgage loans.
The Trust received $275,494 and $493,122 of distributions allocable to
interest on the mortgage loans during the third quarter of 1998 and
1997, respectively. The lower interest income for 1998 is
attributed to the lower principal balances of mortgages outstanding
due to mortgage amortization and mortgage loan principal
prepayments. These prepayments result in lower net income because
the profit produced by the differences in the interest rate
collected on the mortgage loans and the rate paid to bondholders
decreases as mortgage loans are prepaid. Prepayments also increase
the charge in the period of prepayment for amortization of deferred
issuance costs, which occurs over the life of the outstanding
bonds.
As of May 1, 1994 the lockout period for mortgage loan prepayment had
expired for all mortgage loans in the 1990 Rated Series A-1 pool.
Because the interest rate on the mortgage loans in the pool is
higher than the prevailing rates for similar loans, prepayments on
principal on the mortgage loans are likely to occur. Seventeen
mortgage loans with outstanding balances totaling $17,387,137 had
been prepaid as of September 30, 1998. These proceeds from
prepayment were used to make principal payments on Class A mortgage
pass-through certificates. Although $17,387,137 of prepayments
have been received to date, no assurance can be given as to the
rate of prepayments on the mortgage loans pledged as security for
the mortgage pass-through certificates, and therefore no assurance
can be given as to the amount and timing of redemptions of mortgage
pass-through certificates or the time that any particular mortgage
pass-through certificate will remain outstanding prior to its
stated maturity.
Management of Christian Mutual Life Insurance Company (CML), as servicer
of the loans, is closely monitoring two loans with recorded
balances totaling $1,083,775 at September 30, 1998. Management is
concerned with the ongoing ability of the borrowers to meet debt
service requirements. One of the loans with a recorded balance of
$849,075 has been recorded in accordance with Financial Accounting
Standard Board Statement No. 114 based on the value of the
underlying loan collateral less costs of disposal. For the other
loan with an outstanding principal balance of $234,700, management
presently believes that the principal balance and accrued interest
should be fully recoverable in the event of default.
The church building and property securing the loan with a recorded balance
of $849,075 at September 30, 1998, which is included in the amount
of closely monitored loans as previously discussed, are located
near the south central section of Los Angeles, California, the
scene of civil unrest on April 29, 1992 and an earthquake on
January 17, 1994. Management established a loan loss reserve of
$652,422 and $258,698 in 1994 for foregone interest at December 31,
1994.
With respect to this loan, the church's sanctuary had been damaged by the
earthquake. The church reported that it had originally obtained a
loan from the Small Business Administration for $607,700 at 4%
interest to assist in reconstruction of the sanctuary. The church
also reports the permitting process is completed. Four contractors
have submitted bids each in excess of $1,100,000. The church has
informed the company that the SBA has approved its request to
borrow additional funds, for a total SBA loan amount of $1,278,200.
The treasurer reports that a possible sale of the property to Magic
Johnson Construction Company is being negotiated. This could lead
to a pay off of the mortgage by year-end if negotiations are
successful. Meanwhile, the church has completed the rehab of the
sanctuary. The treasurer has assured management that weekly drafts
will be honored. The church reports that the summertime is
difficult for collections; however, the treasurer has communicated
his and the church's hope that the momentum created by the
construction of the sanctuary will stabilize giving.
Although it was reported that the sanctuary rehab was completed, there are
additional items that must be finished before a certificate of
occupancy is issued. Meetings have been conducted in the sanctuary
pending the issuance of the certificate, however, the church
reports that it owes $100,000 to the sub-contractor and it needs
an additional $100,000 to complete all items on the certificate.
The church has applied for an additional $200,000 from the SBA
which has been rejected. They are appealing that decision.
Meanwhile work has been halted on completion of the remaining
items.
On March 7, 1997, the treasurer proposed a new payment schedule for a
twelve month period. The schedule provides for a weekly draft of
$4,500 for a monthly payment of $19,500. Additional drafts of
$10,000 on March 11, $13,800 on April 11, $13,800 on May 11 and
$10,000 on June, July, August and September 11 will enable payments
to be current at the $19,500 per month level. The additional draft
for April 11 was successfully completed on April 24. The
additional draft for May 11 in the amount of $13,800 was returned
for insufficient funds. The additional drafts for $10,000 for
June, July and August have not been completed.
Weekly drafts of $4,500 continue to be returned for insufficient funds.
The treasurer reports that although the number of people has
increased from 450 to 1,000, the offerings have remained the same.
The church is planning on a major giving campaign as well as two
concerts to aggressively address their giving shortfall. Advising
the people of financial needs is a departure from their usual
practice. The treasurer is confident the people will respond to the
plea. The cumulative past due interest as of November 1, 1998 is
$286,178.
On February 17, 1998, the treasurer reported that the City Council has
approved the necessary GAP financing required and finalized the
contracts with Magic Johnson/McFarlance Urban Partner, Group.
Negotiation for acquisition began in March 1998. It is estimated
that a payoff could occur by January 1999. Meanwhile, construction
activities remain halted pending FEMA issues. On August 17, 1998,
the treasurer reported that negotiations for acquisition are
proceeding as planned. On October 29, 1998 the treasurer reported
that an initial offer was refused by the Church and an apology for
the offer was made. The Church was assured that any future offers
will be equitable.
With respect to the loan with a recorded balance of $234,700, the church
has not been able to make complete monthly payments since April 1,
1996 and is presently in arrears. The company is presently
communicating with the church in efforts to bring the payments
current. Management, although concerned with the ongoing ability
of the church to meet the monthly payment, continues to believe all
principal and interest are recoverable in the event of default.
A site visit in April 1998 by the servicer found the property in
good repair and recently painted.
Through September 30, 1998 the Trust has experienced total payment
shortfalls of $645,117. This shortfall represents principal and
interest payments due to bondholders, but not yet disbursed because
mortgage payments received by the Trust are not adequate to cover
these debt service payments. The total amount of interest accrued
but not recorded at September 30, 1998 is $295,364.
In assessing the recoverability of loan balances, management evaluates
factors relevant to the borrower's financial condition and obtains
updates of original appraisals when considered necessary. The
Trust has recorded a general loan loss reserve of $200,000 which
is specifically related to the loans which collateralize the
mortgage pass-through certificates.
Liquidity and Capital Resources
The Trust has no fixed assets nor any commitments outstanding to purchase
or lease any fixed assets.
Each class of certificates was structured in a manner that such funds
received from the related mortgage loans would be sufficient to
fund all interest and principal payments on the certificates, and
all other expenses of the Trust. Shortfalls discussed in note 2
were not anticipated in cash flow projections at the time the pool
was formed. Because of these matters, the Trust has not made
$242,801 of scheduled principal and interest payments to date on
the senior and subordinated mortgage pass-through certificates.
Additionally, no assurances can be given as to the amount of
shortfalls of principal and interest on loans in default which may
occur in the future. The certificates represent an interest in the
Pool created pursuant to the Pooling Agreement and do not represent
an interest in or obligation of, and are not guaranteed by the
Company, CML, the Underwriter or any other affiliate of the
Company, or any other person or entity other than the Pool created
pursuant to the Pooling Agreement. Distributions of interest on
the certificates and amounts in reduction of outstanding amount of
the Class A, Class B, Class C and Class D Certificates will be made
from the assets held by the Trustee under the Pooling Agreement
(primarily the mortgage loans and principal and interest payments
thereon) and there will be no other source of funds for such
distributions.
Year 2000 Compliance
By the end of 1999, the Company expects that its various administrative
systems will have the capability to process transactions dated
beyond 1999. The costs to complete the Company's efforts to modify
or replace such systems are not expected to be material.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
Defaults are discussed in detail under Management's Discussion and Analysis
of Financial Condition and Results of Operations. Shortfalls against
scheduled payments and reconciliations of actual indebtedness to scheduled
indebtedness, by class, are shown below:
Quarterly Total
Principal Principal
& Interest & Interest
Bond Indebtedness Shortfalls Arrearage
Class (Par Value) (Recoveries) to Date
A $ 1,092,867 $ 325,437 $ 510,901
B 25,571 51,142
C 25,700 53,018
D 15,410 30,819
Total $ 1,092,867 $ 392,118 $ 645,880
Principal Unrealized Scheduled
Bond Indebtedness Shortfalls Losses Indebtedness
Class (Par Value) to Date to Date (Par Value)
A $ 1,092,867 $ 413,573 $3,305,695 $ 3,984,989
B 938,379 938,379
C 190 1,433 1,243
D 622,615 622,615
Total $ 1,092,867 $ 413,764 $4,868,122 $ 5,547,226
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date CML Church Mortgage
Trust
1990 Rated Series
A-1
November 19, 1998 By: /s/ Roger T. Stephenson
Roger T. Stephenson
Vice President
November 19, 1998 By: /s/ M. F. Hron
M. F. Hron
Vice President
